Published: February 26, 2010
Iowa Telecom Reports Results for Fourth Quarter And Year Ended December 31, 2009
NEWTON, Iowa - (BUSINESS WIRE) - Iowa Telecommunications Services, Inc. (NYSE: IWA) today announced
operating results for the fourth quarter and year ended December 31,
2009. Quarterly highlights for the Company include:
-
Operating revenues were $65.7 million.
-
Operating income was $10.8 million.
-
Net loss was $1.7 million or $(0.06) per diluted share.
-
Adjusted EBITDA (as defined herein) was $31.1 million.
"Our operational and financial performance during 2009 was very strong,
particularly in light of the year's challenging economic conditions,"
said Alan L. Wells, Iowa Telecom Chairman and Chief Executive Officer.
"For the year, we generated revenues of $254.1 million, operating income
of $53.0 million, net income of $10.3 million and Adjusted EBITDA of
$124.2 million. More importantly, we paid our shareholders $52.7 million
in dividends. At year end, we had 253,000 total telephone access lines
as well as 158,500 long distance subscribers, 95,200 DSL subscribers,
27,100 video subscribers and 10,200 dial up subscribers, reflecting the
successful integration of several acquisitions completed during the year.
"2009 was also an important year strategically for our Company and
shareholders. On November 23, 2009, our Board of Directors approved an
agreement for Windstream Corporation ("Windstream" ) to acquire our
Company in a transaction valued at approximately $1.1 billion," added
Wells. "Our loss for the quarter was primarily the result of costs
related to this transaction. The transaction is proceeding as planned
and we continue to anticipate a closing in mid-2010. I am excited about
the prospects of this new combined entity."
FINANCIAL DISCUSSION FOR FOURTH QUARTER 2009:
-
Revenues and Sales were $65.7 million in the fourth quarter,
compared to $65.0 million in the fourth quarter of 2008 as the impact
of our acquisitions offset the impact of lost access lines and a $3.1
million decrease in CPE sales.
-
Operating Costs and Expenses increased $7.4 million to $54.9
million in the fourth quarter of 2009, compared to $47.5 million in
the fourth quarter of 2008. The 2009 period includes $3.1 million of
costs related to the proposed transaction with Windstream and $938,000
of costs related to business acquisitions. In addition, depreciation
and amortization increased $1.7 million for 2009, as compared to the
fourth quarter of 2008.
-
Operating Income was $10.8 million, compared to $17.5 million
in the fourth quarter of 2008.
-
Interest Expense was $8.3 million in the fourth quarter of both
2009 and 2008.
-
Earnings Before Income Taxes was $2.5 million, compared to $9.1
million in the fourth quarter of 2008.
-
Income Tax Expense for the fourth quarter was $4.2 million,
compared to $4.0 million in the fourth quarter of 2008. The recorded
book tax expense reflects a higher effective tax rate on income before
taxes in part due to the $3.1 million of costs related to the proposed
transaction with Windstream, most of which are not deductible for tax
purposes. The recorded book tax expense did not impact the cash taxes
paid during the quarter. Cash income taxes reflect the continued
utilization of net operating loss carry forwards and continued
goodwill amortization for tax purposes. The Company paid no actual
cash income taxes during the quarter.
-
Net loss was $1.7 million for the quarter, compared to net
income of $5.1 million in the fourth quarter of 2008.
-
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $31.1 million
for the fourth quarter of 2009, compared with $33.1 million in the
same period in 2008. Adjusted EBITDA for the fourth quarter of 2009
includes approximately $4.1 million of costs related to the proposed
transaction with Windstream and business acquisitions, of which only
$2.8 million is allowed to be added back in accordance with the
definition of Adjusted EBITDA in our credit agreement.
-
Total Access Lines decreased by 2,600 during the fourth quarter
of 2009, as compared to the third quarter in 2009, as ILEC access
lines decreased by 3,800 lines and CLEC lines increased by 1,200
lines. DSL subscribers and video subscribers each increased by 700,
and long distance subscribers and dial-up Internet subscribers each
decreased by 1,600.
|
Fourth Quarter 2009 Financial Summary
|
|
(Unaudited)
|
|
(dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
4th Quarter
|
4th Quarter
|
Change
|
|
|
|
2009
|
|
|
2008
|
Amount
|
Percent
|
|
|
|
|
|
|
|
Revenue
|
$
|
65,739
|
|
$
|
65,020
|
$
|
719
|
|
1.1
|
%
|
|
Operating Income
|
$
|
10,845
|
|
$
|
17,538
|
$
|
(6,693
|
)
|
-38.2
|
%
|
|
Interest Expense
|
$
|
8,272
|
|
$
|
8,250
|
$
|
22
|
|
0.3
|
%
|
|
Earnings Before Income Taxes
|
$
|
2,513
|
|
$
|
9,105
|
$
|
(6,592
|
)
|
-72.4
|
%
|
|
Income Tax Expense
|
$
|
4,179
|
|
$
|
4,034
|
$
|
145
|
|
3.6
|
%
|
|
Net Income
|
$
|
(1,666
|
)
|
$
|
5,071
|
$
|
(6,737
|
)
|
-132.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings Per Share (1)
|
$
|
(0.06
|
)
|
$
|
0.16
|
$
|
(0.22
|
)
|
-137.5
|
%
|
|
Diluted Earnings Per Share (1)
|
$
|
(0.06
|
)
|
$
|
0.16
|
$
|
(0.22
|
)
|
-137.5
|
%
|
|
|
|
|
|
|
|
Adjusted EBITDA (2)
|
$
|
31,102
|
|
$
|
33,127
|
$
|
(2,025
|
)
|
-6.1
|
%
|
|
Capital Expenditures
|
$
|
8,056
|
|
$
|
8,044
|
$
|
12
|
|
0.1
|
%
|
|
Dividends Paid
|
$
|
13,285
|
|
$
|
12,949
|
$
|
336
|
|
2.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Basic and diluted earnings per share amounts for
2008 have been retrospectively adjusted to conform with new
authoritative guidance for determining whether instruments granted
in share-based payment transactions are participating securities,
which was adopted by Iowa Telecom effective January 1, 2009. The
effect of adopting this guidance was immaterial to all periods
presented.
|
|
(2) See the definition of Adjusted EBITDA under
Explanation and Reconciliation to Non-GAAP Concepts at the end of
the financial statements.
|
|
Key Operating Statistics
|
|
4th Quarter
|
|
4th Quarter
|
|
Change
|
|
|
|
2009(4)
|
|
2008
|
|
Amount
|
|
Percent
|
|
|
|
|
|
|
|
|
|
|
|
Telephone Access Lines
|
|
|
|
|
|
|
|
|
|
ILEC Lines (1)
|
|
210,300
|
|
209,700
|
|
600
|
|
0.3%
|
|
CLEC Lines (2)
|
|
42,700
|
|
32,400
|
|
10,300
|
|
31.8%
|
|
Total Telephone Access Lines
|
|
253,000
|
|
242,100
|
|
10,900
|
|
4.5%
|
|
|
|
|
|
|
|
|
|
|
|
Long Distance Subscribers
|
|
158,500
|
|
146,400
|
|
12,100
|
|
8.3%
|
|
Dial-up Internet Subscribers
|
|
10,200
|
|
16,700
|
|
(6,500 )
|
|
-38.9%
|
|
DSL Subscribers
|
|
95,200
|
|
75,700
|
|
19,500
|
|
25.8%
|
|
Video Subscribers (3)
|
|
27,100
|
|
20,300
|
|
6,800
|
|
33.5%
|
|
|
4th Quarter
|
3rd Quarter
|
Change
|
|
|
2009(4)
|
2009(4)
|
Amount
|
Percent
|
|
|
|
|
|
|
|
Telephone Access Lines
|
|
|
|
|
|
ILEC Lines (1)
|
210,300
|
|
|
214,100
|
|
|
(3,800
|
)
|
-1.8
|
%
|
|
CLEC Lines (2)
|
42,700
|
|
|
41,500
|
|
|
1,200
|
|
2.9
|
%
|
|
Total Telephone Access Lines
|
253,000
|
|
|
255,600
|
|
|
(2,600
|
)
|
-1.0
|
%
|
|
|
|
|
|
|
|
Long Distance Subscribers
|
158,500
|
|
|
160,100
|
|
|
(1,600
|
)
|
-1.0
|
%
|
|
Dial-up Internet Subscribers
|
10,200
|
|
|
11,800
|
|
|
(1,600
|
)
|
-13.6
|
%
|
|
DSL Subscribers
|
95,200
|
|
|
94,500
|
|
|
700
|
|
0.7
|
%
|
|
Video Subscribers (3)
|
27,100
|
|
|
26,400
|
|
|
700
|
|
2.7
|
%
|
|
|
|
|
|
|
|
(1) Includes lines subscribed by our incumbent local
exchange carrier retail customers and lines subscribed by our
"wholesale" customers who are competing local exchange carriers.
Wholesale access lines include: lines subscribed by our local
exchange carrier competitors pursuant to interconnection
agreements on an unbundled network element basis, for which the
competitive local exchange carrier pays us a monthly fee; lines
that we provide to competitive local exchange carriers for resale
to their subscribers, for which the competitive local exchange
carrier pays us a monthly fee equal to what we would charge our
customers for local service less an agreed discount; and shared
lines, for which a competitive local exchange carrier pays us a
monthly fee to provide DSL service to its customers. We had 2,300
wholesale lines subscribed at December 31, 2008; 1,900 at
September 30, 2009; and 1,800 at December 31, 2009.
|
|
(2) Access lines subscribed by customers of our
competitive local exchange carrier subsidiaries, Iowa Telecom
Communications, Inc., IT Communications, LLC, En-Tel
Communications, LLC, Lakedale Link, Inc. and Lakedale Link, LLC.
|
|
3 Includes subscribers served via our facilities as
well as subscribers of satellite services which we resell.
|
|
4 Includes units acquired from Sherburne Tele Systems,
Inc. as of July 1, 2009.
|
FINANCIAL DISCUSSION FOR YEAR ENDED DECEMBER 31, 2009:
-
Operating Revenues increased $7.2 million, or 2.9%, to $254.1
million for the year ended December 31, 2009, as compared to 2008. The
impact of our acquisitions and increased data and internet services
revenue more than offset the impact of lost access lines and a $5.3
million decrease in CPE sales.
-
Costs and Expenses increased $24.6 million, or 14.0%, to $201.1
million in 2009, as compared to 2008. The 2009 period included $3.1
million of costs related to the proposed transaction with Windstream,
$3.2 million of costs related to business acquisitions and a $1.8
million one-time charge related to a network access matter. Costs of
CPE sales decreased by $3.9 million. The remaining increase in costs
of services and sales and selling, general and administrative costs is
primarily due to the impact of the Sherburne acquisition and the
full-year impact of the Bishop Communications acquisition.
Depreciation and amortization increased $7.4 million, or 13.8%, to
$61.1 million.
-
Operating Income decreased to $53.0 million in 2009, compared
to $70.5 million in 2008.
-
Interest Expense was $31.8 million in 2009, compared to $31.4
million in 2008.
-
Earnings Before Income Taxes for the year was $23.5 million, a
decrease of 41.9%, compared to $40.4 million in 2008.
-
Income Tax Expense for 2009 was $13.1 million, compared $17.3
million in 2008. The Company paid actual cash income taxes in 2009 of
only $62,000. The recorded book tax expense reflects a higher
effective tax rate on income before taxes in part due to the $3.1
million of costs related to the proposed transaction with Windstream,
most of which are not deductible for tax purposes.
-
Net Income was $10.3 million for 2009, compared to net income
of $23.0 million in 2008.
-
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA as defined herein) was $124.2
million for 2009, as compared with $128.3 million for 2008. Adjusted
EBITDA for 2009 included approximately $6.3 million of costs related
to the proposed transaction with Windstream and business acquisitions,
of which only $5.0 million is allowed to be added back in accordance
with the definition of Adjusted EBITDA in our credit agreement. In
addition, 2009 included a one-time $1.8 million charge related to a
network access billing matter.
-
Total Access Lines increased by 10,900, or 4.5%, for 2009, as
compared to 2008 primarily due to the addition of access lines related
to the Sherburne acquisition. Incumbent local exchange carrier access
lines increased by 600 lines and competitive local exchange carrier
lines increased by 10,300 lines from the end of 2008.
|
2009 Financial Summary
|
|
(Unaudited)
|
|
(dollars in thousands, except per share amounts)
|
|
|
|
|
Change
|
|
|
|
2009
|
|
2008
|
Amount
|
Percent
|
|
|
|
|
|
|
|
Revenue
|
$
|
254,142
|
$
|
246,965
|
$
|
7,177
|
|
2.9
|
%
|
|
Operating Income
|
$
|
53,009
|
$
|
70,466
|
$
|
(17,457
|
)
|
-24.8
|
%
|
|
Interest Expense
|
$
|
31,813
|
$
|
31,444
|
$
|
369
|
|
1.2
|
%
|
|
Earnings Before Income Taxes
|
$
|
23,454
|
$
|
40,389
|
$
|
(16,935
|
)
|
-41.9
|
%
|
|
Income Tax Expense
|
$
|
13,117
|
$
|
17,345
|
$
|
(4,228
|
)
|
-24.4
|
%
|
|
Net Income
|
$
|
10,337
|
$
|
23,044
|
$
|
(12,707
|
)
|
-55.1
|
%
|
|
|
|
|
|
|
|
Basic Earnings Per Share (1)
|
$
|
0.29
|
$
|
0.71
|
$
|
(0.42
|
)
|
-59.2
|
%
|
|
Diluted Earnings Per Share (1)
|
$
|
0.29
|
$
|
0.70
|
$
|
(0.41
|
)
|
-58.6
|
%
|
|
|
|
|
|
|
|
Adjusted EBITDA(2)
|
$
|
124,172
|
$
|
128,311
|
$
|
(4,139
|
)
|
-3.2
|
%
|
|
Capital Expenditures
|
$
|
24,307
|
$
|
28,166
|
$
|
(3,859
|
)
|
-13.7
|
%
|
|
|
|
|
|
|
|
Dividends Paid
|
$
|
52,722
|
$
|
51,748
|
$
|
974
|
|
1.9
|
%
|
|
|
|
|
|
|
|
(1) Basic and diluted earnings per share amounts for
2008 have been retrospectively adjusted to conform with new
authoritative guidance for determining whether instruments granted
in share-based payment transactions are participating securities,
which was adopted by Iowa Telecom effective January 1, 2009. The
effect of adopting this guidance was immaterial to all periods
presented.
|
|
(2) See the definition of Adjusted EBITDA under
Explanation and Reconciliation to Non-GAAP Concepts at the end of
the financial statements.
|
Windstream Merger Agreement
On November 23, 2009, we entered into a definitive Agreement and Plan of
Merger (the "Merger Agreement" ) with Windstream and Buffalo Merger Sub,
Inc., a wholly-owned subsidiary of Windstream ("Newco" ). The Merger
Agreement provides that, upon the terms and subject to the conditions
set forth in the Merger Agreement, we will merge with and into Newco,
with Newco continuing as the surviving corporation (the "Merger" ).
Pursuant to the Merger Agreement, at the effective time and as a result
of the Merger, each share of Iowa Telecom common stock outstanding
immediately prior to the effective time of the Merger will be converted
into and become exchangeable for (i) shares of common stock of
Windstream at a fixed exchange ratio of 0.804 and (ii) $7.90 in cash.
The transaction is expected to close in the middle of 2010. Completion
of the Merger with Windstream is conditioned upon the receipt of certain
governmental consents and approvals, and our shareholders' approval. The
special meeting of the Company's shareholders to vote on the Merger has
been scheduled for March 25, 2010, and the proxy statement/prospectus
for the special meeting was mailed to shareholders on or about February
22, 2010. No assurance can be given that the required conditions to
closing will be satisfied or that the Merger will be completed.
The merger agreement is attached as Exhibit 2.1 to the Current Report on
Form 8-K that Iowa Telecom filed with the Securities and Exchange
Commission on November 24, 2009.
Iowa Telecom will not host an investor call with respect to the
financial results.
Additional Information and Where to Find It
In connection with the proposed transaction, Windstream has filed a
registration statement on Form S-4 with the SEC, which includes the
Company's proxy statement and also constitutes a prospectus with respect
to the Windstream securities. On or about February 22, 2010, the Company
mailed the proxy statement/prospectus to its shareholders.
INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT AND PROXY
STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS) BECAUSE
THEY CONTAIN IMPORTANT INFORMATION. Investors may obtain free copies of
the registration statement and proxy statement/prospectus, as well as
other filings containing information about Windstream and the Company,
without charge, at the SEC's Internet web site (www.sec.gov).
These documents may also be obtained for free from the Company's
Investor Relations web site (www.iowatelecom.com)
or by directing a request to the Company at 403 W. Fourth Street North,
Newton, Iowa 50208 or by calling (641) 787-2000. Copies of Windstream's
filings may be obtained for free from Windstream's Investor Relations
Web Site (www.windstream.com)
or by directing a request to Windstream at Windstream Investor
Relations, 4001 Rodney Parham Road, Little Rock, Arkansas 72212 or by
calling (866) 320-7922.
The Company, Windstream and their respective officers and directors may
be deemed, under SEC rules, to be participants in the solicitation of
proxies from the Company's shareholders with respect to the proposed
Merger. Information regarding the officers and directors of the Company
is included in its definitive proxy statement for its 2009 annual
meeting filed with the SEC on April 29, 2009. Information regarding the
officers and directors of Windstream is included in its Form 10-K for
2009 filed on February 22, 2010, and in its definitive proxy statement
for its 2009 annual meeting filed with the SEC on March 23, 2009. More
detailed information regarding the identity of potential participants in
the solicitation, and their direct or indirect interests, by securities,
holdings or otherwise, which interests may be different from those of
the Company's shareholders generally, are set forth in the proxy
statement/prospectus and other materials to be filed with SEC in
connection with the proposed transaction.
About Iowa Telecom
Iowa Telecommunications Services, Inc. (d/b/a Iowa Telecom) is a
telecommunications service provider that offers local telephone, long
distance, Internet, broadband and network access services to business
and residential customers. The Company and its subsidiaries serve over
450 Iowa communities and 10 Minnesota communities, and employ nearly 800
people. The company's headquarters are in Newton, Iowa. The Company
trades on the New York Stock Exchange under the symbol IWA. For further
information regarding Iowa Telecom, please go to www.iowatelecom.com
and select "Investor Relations." The Iowa Telecom logo is a registered
trademark of Iowa Telecommunications Services, Inc. in the United States.
Forward-Looking Statements
The press release may contain forward-looking statements that are not
based on historical fact, including without limitation statements
containing the words "believes," "may," "plans," "will," "estimate,"
"continue," "anticipates," "intends," "expects," and similar
expressions. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause actual results,
events or developments to be materially different from future results,
events or developments described in the forward-looking statements. Such
factors include those risks described in Iowa Telecom's Form 10-K on
file with the SEC. In addition, with respect to the forward-looking
information contained in this release relating to the Merger, if the
Company does not receive the required shareholder approval or fails to
satisfy other conditions to closing, the Merger may not be consummated,
and the following factors, among others, could cause actual results to
differ materially from those described in the forward-looking statements
relating to the Merger: risks associated with uncertainty as to whether
the Merger will be completed, costs and potential litigation associated
with the transaction, the failure to obtain approval of the Company's
shareholders, the failure of either party to meet the closing conditions
set forth in the Merger Agreement, and the extent and timing of
regulatory approvals. These and the factors referenced above should be
considered carefully and readers are cautioned not to place undue
reliance on such forward-looking statements. All information is current
as of the date this press release is issued, and Iowa Telecom undertakes
no duty to update this information.
|
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
|
|
Balance Sheets
|
|
(Unaudited)
|
|
(dollars in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
|
December 31, 2009
|
|
December 31, 2008
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
12,259
|
|
|
$
|
11,605
|
|
|
|
Accounts receivable, net
|
|
22,632
|
|
|
|
23,320
|
|
|
|
Inventories
|
|
5,105
|
|
|
|
3,946
|
|
|
|
Prepayments and other current assets
|
|
7,857
|
|
|
|
3,149
|
|
|
|
Total Current Assets
|
|
47,853
|
|
|
|
42,020
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND EQUIPMENT
|
|
|
|
|
|
Property, plant and equipment
|
|
672,270
|
|
|
|
601,782
|
|
|
|
Accumulated depreciation
|
|
(365,631
|
)
|
|
|
(310,936
|
)
|
|
|
Property, Plant and Equipment, net
|
|
306,639
|
|
|
|
290,846
|
|
|
|
|
|
|
|
|
|
GOODWILL
|
|
492,956
|
|
|
|
473,984
|
|
|
|
INTANGIBLE ASSETS AND OTHER, NET
|
|
51,238
|
|
|
|
36,904
|
|
|
|
INVESTMENT IN AND RECEIVABLE FROM
|
|
|
|
|
|
THE RURAL TELEPHONE FINANCE
|
|
|
|
|
|
COOPERATIVE
|
|
17,141
|
|
|
|
16,174
|
|
|
|
Total Assets
|
$
|
915,827
|
|
|
$
|
859,928
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
Revolving credit facility
|
$
|
37,000
|
|
|
$
|
39,000
|
|
|
|
Accounts payable
|
|
12,408
|
|
|
|
11,017
|
|
|
|
Advanced billings and customer deposits
|
|
10,470
|
|
|
|
8,615
|
|
|
|
Accrued and other current liabilities
|
|
33,195
|
|
|
|
32,429
|
|
|
|
Current maturities of long-term debt
|
|
3,276
|
|
|
|
1,219
|
|
|
|
Total Current Liabilities
|
|
96,349
|
|
|
|
92,280
|
|
|
|
LONG-TERM DEBT
|
|
565,214
|
|
|
|
489,003
|
|
|
|
DEFERRED TAX LIABILITIES
|
|
60,783
|
|
|
|
47,575
|
|
|
|
OTHER LONG-TERM LIABILITIES
|
|
25,914
|
|
|
|
28,326
|
|
|
|
Total long-term liabilities
|
|
651,911
|
|
|
|
564,904
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
748,260
|
|
|
|
657,184
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
Common stock, $.01 par value, 100,000,000
|
|
|
|
|
|
shares authorized, 32,193,036 and
|
|
|
|
|
|
31,500,687 shares issued and outstanding
|
|
322
|
|
|
|
315
|
|
|
|
Additional paid-in capital
|
|
332,722
|
|
|
|
327,264
|
|
|
|
Accumulated deficit
|
|
(153,383
|
)
|
|
|
(110,814
|
)
|
|
|
Accumulated other comprehensive loss
|
|
(12,094
|
)
|
|
|
(14,308
|
)
|
|
|
Total Iowa Telecom stockholders' equity
|
|
167,567
|
|
|
|
202,457
|
|
|
|
Noncontrolling interest
|
|
-
|
|
|
|
287
|
|
|
|
Total Stockholders' Equity
|
|
167,567
|
|
|
|
202,744
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders' Equity
|
$
|
915,827
|
|
|
$
|
859,928
|
|
|
|
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
|
|
Income Statements
|
|
(Unaudited)
|
|
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
Twelve Months Ended
December 31,
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
REVENUE AND SALES
|
|
|
|
|
|
Local services
|
$
|
19,321
|
|
$
|
18,005
|
|
|
74,859
|
|
$
|
71,131
|
|
|
Network access services
|
|
22,817
|
|
|
23,563
|
|
|
87,690
|
|
|
89,420
|
|
|
Toll services
|
|
5,529
|
|
|
5,616
|
|
|
22,234
|
|
|
23,010
|
|
|
Data and internet services
|
|
11,923
|
|
|
9,548
|
|
|
43,040
|
|
|
35,163
|
|
|
Other services and sales
|
|
6,149
|
|
|
8,288
|
|
|
26,319
|
|
|
28,241
|
|
|
Total revenues and sales
|
|
65,739
|
|
|
65,020
|
|
|
254,142
|
|
|
246,965
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND EXPENSES
|
|
|
|
|
|
Cost of services and sales (exclusive of items shown separately
below)
|
|
22,104
|
|
|
20,310
|
|
|
83,640
|
|
|
78,091
|
|
|
Selling, general and administrative
|
|
16,428
|
|
|
12,484
|
|
|
56,401
|
|
|
44,714
|
|
|
Depreciation and amortization
|
|
16,362
|
|
|
14,688
|
|
|
61,092
|
|
|
53,694
|
|
|
Total operating costs and expenses
|
|
54,894
|
|
|
47,482
|
|
|
201,133
|
|
|
176,499
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
10,845
|
|
|
17,538
|
|
|
53,009
|
|
|
70,466
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
Interest and dividend income
|
|
138
|
|
|
209
|
|
|
1,880
|
|
|
938
|
|
|
Interest expense
|
|
(8,272
|
)
|
|
(8,250
|
)
|
|
(31,813
|
)
|
|
(31,444
|
)
|
|
Other, net
|
|
(198
|
)
|
|
(392
|
)
|
|
378
|
|
|
429
|
|
|
Total other expense, net
|
|
(8,332
|
)
|
|
(8,433
|
)
|
|
(29,555
|
)
|
|
(30,077
|
)
|
|
|
|
|
|
|
|
EARNINGS BEFORE INCOME TAXES
|
|
2,513
|
|
|
9,105
|
|
|
23,454
|
|
|
40,389
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
4,179
|
|
|
4,034
|
|
|
13,117
|
|
|
17,345
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
(1,666
|
)
|
|
5,071
|
|
|
10,337
|
|
|
23,044
|
|
|
Noncontrolling interest
|
|
-
|
|
|
105
|
|
|
195
|
|
|
105
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) ATTRIBUTABLE TO IOWA TELECOMMUNICATIONS
|
$
|
(1,666
|
)
|
$
|
5,176
|
|
$
|
10,532
|
|
$
|
23,149
|
|
|
|
|
|
|
|
|
COMPUTATION OF EARNINGS
|
|
|
|
|
|
PER SHARE (1)
|
|
|
|
|
|
Basic - Earnings Per Share
|
$
|
(0.06
|
)
|
$
|
0.16
|
|
$
|
0.29
|
|
$
|
0.71
|
|
|
Basic - Weighted average number of shares outstanding
|
|
32,093
|
|
|
31,501
|
|
|
31,934
|
|
|
31,477
|
|
|
|
|
|
|
|
|
Diluted - Earnings Per Share
|
$
|
(0.06
|
)
|
$
|
0.16
|
|
$
|
0.29
|
|
$
|
0.70
|
|
|
Diluted - Weighted average number of shares outstanding
|
|
32,093
|
|
|
32,095
|
|
|
32,203
|
|
|
32,056
|
|
|
|
|
|
|
|
|
(1) Basic and diluted earnings per share amounts for
2008 have been retrospectively adjusted to conform with new
authoritative guidance for determining whether instruments granted
in share-based payment transactions are participating securities,
which was adopted by Iowa Telecom effective January 1, 2009. The
effect of adopting this guidance was immaterial to all periods
presented.
|
|
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
|
|
Statements of Cash Flows
|
|
(Unaudited)
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
|
Twelve Months Ended
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING
|
|
|
|
|
|
|
|
|
|
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
(1,666
|
)
|
$
|
5,071
|
|
|
|
$
|
10,337
|
|
$
|
23,044
|
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
15,425
|
|
|
13,906
|
|
|
|
|
58,403
|
|
|
51,747
|
|
|
|
Amortization of intangible assets
|
|
|
937
|
|
|
782
|
|
|
|
|
2,689
|
|
|
1,947
|
|
|
|
Amortization of debt issuance costs
|
|
|
384
|
|
|
174
|
|
|
|
|
1,113
|
|
|
640
|
|
|
|
Deferred income taxes
|
|
|
4,176
|
|
|
4,613
|
|
|
|
|
12,843
|
|
|
17,286
|
|
|
|
Non-cash stock-based compensation expense
|
|
|
969
|
|
|
893
|
|
|
|
|
3,771
|
|
|
3,553
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
11
|
|
|
(2,032
|
)
|
|
|
|
3,164
|
|
|
(1,754
|
)
|
|
|
Inventories
|
|
|
493
|
|
|
265
|
|
|
|
|
326
|
|
|
(15
|
)
|
|
|
Accounts payable
|
|
|
2,382
|
|
|
739
|
|
|
|
|
(48
|
)
|
|
1,267
|
|
|
|
Pension and postretirement benefit plan obligations
|
|
|
(31
|
)
|
|
(2,746
|
)
|
|
|
|
(687
|
)
|
|
(4,147
|
)
|
|
|
Other assets and liabilities
|
|
|
4,469
|
|
|
920
|
|
|
|
|
(733
|
)
|
|
(5,012
|
)
|
|
|
Net cash provided by operating activities
|
|
|
27,549
|
|
|
22,585
|
|
|
|
|
91,178
|
|
|
88,556
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(8,056
|
)
|
|
(8,044
|
)
|
|
|
|
(24,307
|
)
|
|
(28,166
|
)
|
|
|
Business acquisitions (net of cash acquired)
|
|
|
(1,136
|
)
|
|
319
|
|
|
|
|
(81,179
|
)
|
|
(33,100
|
)
|
|
|
Purchase of wireless licenses
|
|
|
-
|
|
|
-
|
|
|
|
|
-
|
|
|
(5,938
|
)
|
|
|
Net cash used in investing activities
|
|
|
(9,192
|
)
|
|
(7,725
|
)
|
|
|
|
(105,486
|
)
|
|
(67,204
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
Net change in revolving credit facility
|
|
|
(4,000
|
)
|
|
2,000
|
|
|
|
|
(2,000
|
)
|
|
21,000
|
|
|
|
Proceeds from exercise of stock options
|
|
|
26
|
|
|
-
|
|
|
|
|
703
|
|
|
-
|
|
|
|
Payment of debt issuance costs
|
|
|
-
|
|
|
-
|
|
|
|
|
(2,009
|
)
|
|
(351
|
)
|
|
|
Issuance of long-term debt
|
|
|
-
|
|
|
-
|
|
|
|
|
75,000
|
|
|
-
|
|
|
|
Payment on long-term debt
|
|
|
(498
|
)
|
|
(291
|
)
|
|
|
|
(1,585
|
)
|
|
(599
|
)
|
|
|
Acquisition of noncontrolling interest
|
|
|
-
|
|
|
-
|
|
|
|
|
(1,890
|
)
|
|
-
|
|
|
|
Capital contributions from
|
|
|
|
|
|
|
|
|
|
noncontrolling interests
|
|
|
-
|
|
|
520
|
|
|
|
|
390
|
|
|
520
|
|
|
|
Shares reacquired
|
|
|
(432
|
)
|
|
-
|
|
|
|
|
(925
|
)
|
|
(488
|
)
|
|
|
Dividends paid
|
|
|
(13,285
|
)
|
|
(12,949
|
)
|
|
|
|
(52,722
|
)
|
|
(51,748
|
)
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(18,189
|
)
|
|
(10,720
|
)
|
|
|
|
14,962
|
|
|
(31,666
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents
|
|
|
168
|
|
|
4,140
|
|
|
|
|
654
|
|
|
(10,314
|
)
|
|
|
Cash and Cash Equivalents at Beginning of Period
|
|
|
12,091
|
|
|
7,465
|
|
|
|
|
11,605
|
|
|
21,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents at End of Period
|
|
$
|
12,259
|
|
$
|
11,605
|
|
|
|
$
|
12,259
|
|
$
|
11,605
|
|
|
|
IOWA TELECOMMUNICATIONS SERVICES, INC. AND SUBSIDIARIES
|
|
EXPLANATIONS AND RECONCILIATIONS TO NON-GAAP CONCEPTS
|
|
(Unaudited)
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
Twelve Months Ended
December 31,
|
|
|
|
|
2009
|
2008(1)
|
2009
|
2008 (1)
|
|
|
|
|
|
|
|
ADJUSTED EBITDA:
|
|
|
|
|
|
Net income
|
$ (1,666 )
|
$ 5,176
|
$ 10,337
|
$ 23,149
|
|
Income tax expense
|
4,179
|
4,034
|
13,117
|
17,345
|
|
Interest expense
|
8,272
|
8,250
|
31,813
|
31,444
|
|
Depreciation and amortization
|
16,362
|
14,688
|
61,092
|
53,694
|
|
Unrealized (gains) losses on financial derivatives
|
189
|
455
|
729
|
(314 )
|
|
Non-cash stock-based compensation expense (2)
|
969
|
893
|
3,771
|
3,553
|
|
Extraordinary or unusual (gains) losses
|
-
|
-
|
-
|
-
|
|
Non-cash portion of RTFC Capital
|
|
|
|
|
|
Allocation (3)
|
23
|
(369 )
|
(651 )
|
(560 )
|
|
Other non-cash losses (gains)
|
-
|
-
|
(1,036 )
|
-
|
|
Loss (gain) on disposal of assets not in ordinary course
|
-
|
-
|
-
|
-
|
|
Transaction costs
|
2,774
|
-
|
5,000
|
-
|
|
ADJUSTED EBITDA
|
$ 31,102
|
$ 33,127
|
$ 124,172
|
$ 128,311
|
|
|
|
|
|
|
|
(1) The FASB issued amended guidance regarding
"Noncontrolling Interest in Consolidated Financial
Statements." The amended guidance was adopted by Iowa Telecom
effective January 1, 2009 and the Statement of Operations has been
retrospectively adjusted to conform to new authoritative guidance.
The Adjusted EBITDA calculation as presented for 2008 is
calculated in accordance with the definition of Adjusted EBITDA,
as defined in our credit agreement, and financial statements
prepared in accordance with the authoritative guidance in effect
at that time.
|
|
(2) Included in Selling, General and Administrative
Expense on the Consolidated Statements of Operations.
|
|
(3) Included in Interest and Dividend Income on the
Consolidated Statements of Operations.
|
We present Adjusted EBITDA because we believe it is a useful indicator
of our historical debt capacity and our ability to service debt and pay
dividends. We also present Adjusted EBITDA because covenants in our
credit facilities contain ratios based on Adjusted EBITDA.
Adjusted EBITDA is defined in our credit facilities as: (1) consolidated
net income, as defined therein; plus (2) the following items, to the
extent deducted from consolidated net income: (a) interest expense; (b)
provision for income taxes; (c) depreciation and amortization; (d)
transaction expenses related to the IPO and the related debt refinancing
and other limited expenses related to permitted securities offerings,
investments and acquisitions incurred after the closing date of the IPO,
to the extent not exceeding $5.0 million; (e) unrealized losses on
financial derivatives; (f) non-cash stock-based compensation expense;
(g) extraordinary or unusual losses (including extraordinary or unusual
losses on permitted sales of assets and casualty events); (h) losses on
sales of assets other than in the ordinary course of business; and (i)
all other non-cash charges that represent an accrual for which no cash
is expected to be paid in the next twelve months; minus (3) the
following items, to the extent any of them increases consolidated net
income: (w) extraordinary or unusual gains (including extraordinary or
unusual gains on permitted sales of assets and casualty events); (x)
gains on asset disposals not in the ordinary course; (y) unrealized
gains on financial derivatives; and (z) all other non-cash income
(including the non-cash portion of any RTFC patronage capital
allocation). If our Adjusted EBITDA were to decline below certain
levels, covenants in our credit facilities that are based on Adjusted
EBITDA, including our fixed charge coverage and total leverage ratio
covenants, may be violated and could cause, among other things, a
default or mandatory prepayment under our credit facilities, or result
in our inability to pay dividends.
We believe that net income is the most directly comparable financial
measure to Adjusted EBITDA under GAAP. Adjusted EBITDA should not be
considered in isolation or as a substitute for consolidated statement of
operations and cash flows data prepared in accordance with GAAP.
Adjusted EBITDA is not a complete measure of an entity's profitability
because it does not include costs and expenses identified above; nor is
Adjusted EBITDA a complete net cash flow measure because it does not
include reductions for cash payments for an entity's obligation to
service its debt, fund its working capital, capital expenditures and
acquisitions and pay its income taxes and dividends.
Investor Relations Contacts:
Kevin Inda
Corporate
Communications, Inc.
407-566-1180
Kevin.Inda@cci-ir.com
or
Craig
Knock
Chief Financial Officer
641-787-2089
or
Media
Contact:
Julie White
Director, Corporate Communications
641-787-2040
Julie.White@iowatelecom.com
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